BlueCross BlueShield of Alabama may have few competitors in the state today, but over the years, several large employers have tried to take on the behemoth insurer.

University of Alabama at Birmingham, Alabama Power, Drummond Co. and SouthTrust bank made attempts in the 1990s to set up their own health insurance programs, but the companies found it hard to break BlueCross’ stronghold on the state health insurance industry, saying their efforts were undermined by swift reaction by BlueCross and consumer apathy.

Consumers, they found, were pleased with BCBS’ service and reluctant to leave a company they liked for unknown commodities, industry experts said.

When UAB gave it a try in the late 1990s, the state’s largest employer with more than 20,000 employees figured it had a significant client base that would prefer to use the university’s facilities, according to former UAB Public Health Professor Eric Ford.

Ford said UAB’s plan offered cheaper premium rates than BCBS but overestimated employee participation and enthusiasm for a new plan.

“The consumers liked having BlueCross,” said Ford, now a Texas Tech University health care management professor. “UAB tried. They thought they had a large enough employee base to put into the system and most employees would prefer to use their facilities.”

UAB’s efforts to grab a portion of BCBS’ market share failed, but it still operates an HMO known as Viva Health Inc. Viva’s 2007 revenues totaled just $332.3 million, according to financial filings available from the National Assoc-iation of Insurance Commissioners. In 2007, BCBS of Alabama reported $3.5 billion in total revenue. It reported net income of $71.6 million that year.

In 1996, the Alabama Health Care Council was formed by the CEOs of several major corporations, including Alabama Power, Drummond Co. and SouthTrust bank. The council solicited health insurance proposals and received bids from United Healthcare of Alabama Inc. and HealthPartners of Alabama, the former insurance arm of Baptist Health System.

When BCBS learned the council was moving forward, it offered the council a 20 percent discount in their current rates for three years and they accepted. However, Drummond filed a lawsuit at the turn of the millennium claiming BCBS failed to deliver promised savings.

Drummond reached an undisclosed out-of-court settlement. One change that did surface from the incident was eliminating the “favored nation” provision BCBS included in contract.

A source familiar with BCBS’ contracts said that provision forced providers contracted with BCBS to notify the insurer if they were negotiating with another firm and give BCBS a chance to undercut the third party’s offer.

BCBS denied it required notification or a chance to offer a better deal and said “the so-called Most Favored Nation clauses were removed from our contracts in 2001-2002” in a written statement.

United and Viva remain options in Alabama. United reported $384.5 million in total revenue and $58 million in net income in 2007.

He said in the 1980s, at the height of the HMO movement, Alabama didn’t fit the demographics national firms were looking for. HMOs managed businesses with large employee bases.

“That has to do with the fact we had so many small businesses and not so many big corporations,” Morrisey said.

Despite BCBS’ market share, Morrisey said there are opportunities for other national carriers to enter Alabama. Self-insured administration operations could be competitive for a company willing to try.

“It’s a lot easier to get into the administrative services than it is to enter as a full-blown insurer,” Morrisey said.